Kotak Securities Predicts Crude Oil Prices Could Surge to $120 Amid Global Tensions

Global crude oil markets are bracing for significant volatility as Kotak Securities warns that prices could surge to $120 per barrel in the short term, fueled by intensifying geopolitical tensions, particularly in West Asia. This projection comes at a critical juncture for the global economy, with implications for India's energy security and inflationary pressures. The firm's Assistant Vice President, Kayanat Chainwala, highlighted that prolonged conflict could even push crude to $150 per barrel, emphasizing the crucial role of supply disruptions in driving these elevated prices.

The Catalyst

The primary driver behind this aggressive crude oil price prediction is the escalating geopolitical unrest, especially in the Middle East, including the ongoing conflict involving the US, Israel, and Iran. Disruptions to critical shipping lanes like the Strait of Hormuz and the Red Sea are causing a dual shock of higher energy costs and snarled supply chains. The Strait of Hormuz alone accounts for approximately 20% of global oil consumption, making any disruption here acutely impactful. Recent reports indicate that the ongoing turbulence in the Strait of Hormuz has already led to losses of an estimated 10-12 million barrels per day (bpd), effectively offsetting previous market surpluses and pushing the market towards a deficit. Attacks on oil tankers and energy infrastructure in the region, along with some Gulf producers curbing output due to storage constraints, further intensify supply disruption fears. This has pushed Brent crude prices above $100 a barrel, a level not seen in over 18 months, and WTI crude briefly touched nearly $120 per barrel in early March 2026.

Financial Forensics

Kotak Securities' analysis points to a significant upward revision in crude oil price expectations for 2026, contrasting with earlier bearish outlooks. While a December 2025 report from Kotak Securities had projected subdued crude oil prices in 2026 due to structural oversupply, with prices potentially sliding 9-10% from around $60 per barrel (barring brief geopolitical spikes), the latest escalation has drastically altered this view. The current geopolitical risk premium is now a dominant factor.

Here’s a comparison of recent crude oil price movements and projections:

Note: Prices are indicative and subject to real-time market fluctuations.

This dramatic shift underlines how quickly geopolitical events can override fundamental supply-demand dynamics. The current market, which was facing a surplus of 4-5 million bpd earlier this year, is now confronted with losses that are creating a deficit.

Market Impact

The surging crude oil prices have immediate and significant repercussions for the Indian economy and its financial markets. As the world's third-largest crude oil importer, India relies on imports for over 85% of its crude oil needs, making it highly susceptible to global price volatility. Higher crude prices translate directly into an increased import bill, impacting India's fiscal balances and potentially widening the current account deficit.

On the domestic front, the hike in crude oil directly fuels imported inflation. This puts pressure on the Reserve Bank of India (RBI) to potentially reconsider interest rate cuts, especially given that India's Consumer Price Index (CPI) reading as of January 1, 2026, already indicates elevated inflationary pressures. The Indian Rupee (₹) could also face depreciation pressure as demand for US Dollars increases for crude oil imports.

Indian benchmark indices, such as the Sensex and Nifty 50, have already shown volatility in response to these rising crude oil prices. On March 12, 2026, both indices closed lower, with the Sensex falling by 1.08% and the Nifty 50 by 0.95%. However, the Nifty Energy Index and Nifty Oil & Gas Index have bucked the trend, showing gains as rising crude prices boost the outlook for energy producers. Companies in the power and energy sectors, like Adani Power Ltd and Adani Total Gas Ltd, saw significant surges.

Key Takeaways

• Elevated Volatility: Expect continued high volatility in crude oil markets due to unpredictable geopolitical developments.
• Inflationary Headwinds: Higher crude prices will likely sustain inflationary pressures in India, potentially delaying RBI's rate cut decisions.
• Currency Pressure: The Indian Rupee may weaken against the US Dollar.
• Sectoral Divergence: While broader markets face headwinds, India's oil and gas exploration & production (E&P) and power sectors may see sustained interest and gains.
• Strategic Diversification: India's ongoing efforts to diversify its crude oil sources, including increasing imports from Russia (though this has seen recent fluctuations) and other regions, will be crucial for energy security.

FinScann Verdict

The current crude oil price outlook presents a complex challenge for investors and policymakers. While the immediate surge to $120 per barrel is a direct consequence of acute geopolitical risk and supply disruptions, the market remains sensitive to any signs of de-escalation, which could lead to sharp corrections. For Indian investors, maintaining a diversified portfolio and closely monitoring geopolitical headlines, along with India’s strategic energy import policies, will be paramount. Investing in domestic energy producers might offer some hedge against rising global oil prices, but overall market sentiment will remain cautious until geopolitical stability improves.

Q: What is driving the current surge in crude oil prices? A: The primary driver is escalating geopolitical tensions, particularly in West Asia, leading to disruptions and fears of supply shortages in critical maritime routes like the Strait of Hormuz and the Red Sea.

Q: How high could crude oil prices go? A: Kotak Securities predicts crude oil prices could reach $120 per barrel in the short term. If geopolitical conflicts intensify and persist for an extended period, prices could potentially even surge to $150 per barrel.

Q: How will this impact the Indian economy? A: As a major crude oil importer, India will face a higher import bill, potentially leading to increased imported inflation, pressure on the Indian Rupee, and possible delays in interest rate cuts by the RBI.

Q: Which sectors in India might benefit from rising crude oil prices? A: India's domestic oil and gas exploration & production (E&P) companies, along with segments of the power and energy sectors, are likely to benefit from higher crude oil prices and increased investor interest.

Q: What is India's strategy to mitigate the impact of high crude prices? A: India is actively diversifying its crude oil import sources, including maintaining trade with countries like Russia, to enhance energy security and reduce dependence on any single region. The government is also monitoring supply chains and taking measures to ensure domestic fuel availability.

Disclaimer: For information only; not investment advice. Stock market investments carry risks. Please consult a SEBI-registered advisor before investing. FinScann assumes no liability for decisions made based on this report.